Saturday, July 6, 2013

Economics and the Public Service Board Hearings.

Public Service Board Members
David C. Coen, Chairman James Volz,  John Burke
Photo from PSB Board Member Biography web page
The Hearings

The Vermont Public Service Board has finished its hearings on the docket for the state license (Certificate of Public Good) for the power plant.

This last set of hearings were technical hearings: parties to the process testified and cross-examined each other.  The public could attend, but not comment.  One major issue was economics.

Vermont Economics

One might expect the Board to focus on Vermont's interest in jobs or inexpensive power or whatever.  That is, the Board could be expected to focus on how the plant operation will affect the state.  After all, the Board is a state quasi-judicial regulatory panel.

However, the Board's focus seems to be on whether the plant is profitable for Entergy.  In my opinion, that is more Entergy's business than the Board's business. If Vermont Yankee isn't profitable, it is still only a part of a company.  Vermont Yankee is part of Entergy, and the chances that "the company" would have financial issues is very slight.  (And by the way, the Board doesn't have a particularly good track record at seeing problems coming: think Burlington Telecom). 

Actually, the Board's economic concern with Vermont Yankee profitability is a very thinly veiled nuclear safety concern, in my opinion. Is Entergy making enough money to operate the plant safely? (I am shocked, of course, that the Board is treading so close to federally pre-empted issues.  Shocked, shocked....)

As reported by WCAX, Peter Bradford of Vermont Law School said that: "Most nuclear plant owners are responsible and in any case recognize there is nothing more against their self-interest than an accident, but there's always the possibility somebody will cut a corner..." Commenting on the hearings, WCAX states that: "State officials say the continued economic health of Entergy is vital." 

WCAX.COM Local Vermont News, Weather and Sports-

National Economics

The next step for our local activists was to sue the NRC about Entergy finances.  A group is suing the NRC: it  claims that emergency NRC action is required because Entergy is not "financially qualified" to operate the plants. The suit asks that the NRC take emergency enforcement actions against Vermont Yankee's license (and Pilgrim's license, and Fitzpatrick's license) on the basis that Entergy is operating these plants at a loss. 

Nuclear plants and coal plants are currently struggling because of the low price of natural gas. Still the price of natural gas is about twice as high as it was a year ago, and nobody expects it to go down to the $2 level again.  Nuclear and coal are doing better than they did last year, but it is still not a great situation for merchant plants.  I discussed this at some length in my recent ANS blog post: Philosophy, Shale Gas and the NRC National Meeting.

The NRC inspects plants for safety, not economics.  If a plant cannot meet the safety criteria, the NRC will shut it down until it meets the criteria.  If the plant cannot afford to economically meet the criteria, it will close permanently for economic reasons.  But it will not be closing because the NRC inspected its balance sheet!  The NRC would be concerned if an entire company were about to file for bankruptcy.  How profit and loss are divided within a large company is not something that the NRC would try to regulate. (Note: the NRC does track the adequacy of decommissioning funds.)

Entergy Economics

And what about Entergy itself?  How's the company doing?  Everyone read the UBS report predicting Entergy would close Vermont Yankee: I discussed this report in my blog post: Vermont Yankee is Refueling, and I Sort of Told You So. (Well, actually I sort of trashed the UBS report in that post, by doing a careful analysis of the places where their conclusions didn't match their data.  Hint: always look at the data.)

For further reading about Entergy, I suggest the Seeking Alpha report from last August:  Entergy Corporation: Inside The Numbers.  It reviews Entergy results in several ways, and concludes: This shows that Entergy Corporation is very profitable, and very efficient. Based on the nine tests, overall, the company is showing very strong results.

And that report was written when natural gas prices were  lower than they are today!

Or you can look up Entergy prospects any place on the web.  Any particular plant may operate at a loss or a profit, but the company is a financial powerhouse.

How Thin Was Their Veil

The concentration on Entergy's economics (rather than the effect of Vermont Yankee on the state's economics) is a thinly veiled attempt, once again, to regulate nuclear safety.

Sigh.  I am shocked, shocked....

Coming Attractions in this blog:

In recent days, three main issues were discussed before the Board:
  • Plant economics 
  • River water quality (especially thermal discharge) 
  • Entergy and trust
I plan to cover each issue in a separate post over the next  few days.

1 comment:

Anonymous said...

These bums really seem to be fishing around for a back-door reason to deny the plant a certificate. The court slammed the door in their faces on the safety issues, so now they're going after this red herring. It really seems a stretch to say tht Entergy's profitability falls with the purview of the VERMONT Public Service Board. As your Governor always points out when he is given the opportunity, Entergy is based in Louisiana. Either he should shut up about that and admit that VY is a VERMONT business, or the PSB should butt out. They can't have it both ways.